Abstract

This paper aims at investigating two issues. Firstly, whether there is asignificant difference in returns between Syariah compliant and non-Syariahcompliant firms listed on the Malaysian stock exchange, Bursa Malaysia;and secondly, whether both types of firms react differently to the sameselected firm specific variables. Using panel data techniques, we analysethree hundred (300) firms in Bursa Malaysia for the period from 2000 to2006. The determinants of stock returns used are market capitalisation,market-to-book ratio, price-earnings ratio, market risk and total debt. Theresults indicate that there is no significant difference between Syariahcompliant firms and their counterparts. In addition, using three (3) differentmodels for estimation (i.e. fixed effect, pooled and random effect models),it is found that the fixed effect model is the best model that fits the data.For Syariah compliant firms, it is found that size and market-to-bookratios are the most significant variables explaining returns. However, fornon-Syariah compliant firms, market-to-book ratio and market risk (beta)are the most significant variables influencing returns.Keywords: Firm Specific, Fixed Effect, Panel Data, Syariah Compliant